India: GoM to look at reservations on joining RCEP

  • Divisions within the government over a free trade pact with 16 nations including China has prompted the Centre to set up a group of ministers (GoM) to decide the course of action, a senior official said.
  • Cabinet secretary PK Sinha has called an urgent meeting this week after most ministries and departments expressed reservations about joining the proposed Regional Comprehensive Economic Partnership (RCEP).
  • There is concern across ministries that joining the accord could severely dent local manufacturing and jobs and that China’s USD60bn trade surplus with India will swell even further as it floods the market with cheap goods at zero tariff.
  • The 7 Aug 18 meeting will discuss the pact as pressure grows on New Delhi to seal the deal amid an escalating trade war between China and the US.
  • The RCEP participants want New Delhi to conclude the RCEP pact by 2018, reasoning that it is the last window of opportunity as India will get into election mode soon.
  • There is a view in some quarters of the government that India should instead look at concluding trade pacts separately with Australia and New Zealand. Moreover, New Delhi’s experience with trade pacts hasn’t been very good.
  • The view is that it got a raw deal on services, its core strength, under the Asian trade agreement while losing out on market access in goods that is hurting domestic manufacturing.
  • India has a trade deficit with as many as 10 RCEP countries, including China, South Korea and Australia, among others. It has so far maintained that a speedy and successful conclusion of the agreement would be possible only with the inclusion of a higher level of services and investment in the India-Asean trade basket.

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